Giant Interactive Group Enters into Definitive Merger Agreement for $3 Billion Going-Private Transaction
On March 17, 2014, Giant Interactive Group (NYSE: GA), one of China's leading online game developers and operators, announced that it has entered into a definitive agreement and plan of merger with Giant Investment Limited and Giant Merger Limited, a wholly owned subsidiary of Giant Investment Limited. Pursuant to the merger agreement, Giant Investment Limited will acquire Giant Interactive Group for cash consideration equal to US$12.00 per ordinary share of the company (each, a "share") and US$12.00 per American Depositary Share of the company, each representing one share (each, an "ADS"), or approximately US$3 billion in aggregate cash consideration. This represents an 18.5 percent premium over the closing price of US$10.13 per ADS as quoted by the New York Stock Exchange (NYSE) on November 22, 2013. It is also a premium of 31.6 percent and 33.6 percent, respectively, over Giant Interactive Group's 30- and 60-trading day, volume-weighted average price as quoted by the NYSE prior to November 22, 2013, which was the last trading day prior to Giant Interactive Group's announcement on November 25, 2013, that it had received a non-binding "going-private" proposal from the chairman of the board of directors of the company, Mr. Yuzhu Shi (and certain of his affiliated entities), and an affiliate of Baring Private Equity Asia (Baring Private Equity Asia, together with funds managed and entities controlled by it, "Baring") to acquire all of the outstanding shares, including shares represented by ADSs, not already owned by them.
The consideration to be paid to holders of shares and ADSs pursuant to the merger agreement also represents an increase of approximately 2.1 percent from the original US$11.75 per share and US$11.75 per ADS offer price in the November 25, 2013, proposal.
Immediately following the consummation of the transactions contemplated by the merger agreement, Giant Investment Limited will be beneficially owned by a consortium (the "buyer group") that is comprised of a company owned by Mr. Yuzhu Shi, an affiliate of Baring, and an affiliate of Hony Capital Fund V, L.P. (Hony Capital Fund V, L.P., together with funds managed and entities controlled by it, "Hony Capital"). The buyer group intends to fund the merger through a combination of (i) cash contributions from affiliates of Baring and Hony Capital pursuant to equity commitment letters; (ii) the proceeds from a committed and underwritten loan facility contemplated by a debt commitment letter dated March 17, 2014, pursuant to which China Minsheng Banking, Hong Kong Branch; BNP Paribas Hong Kong Branch; Credit Suisse AG, Singapore Branch; Deutsche Bank AG, Singapore Branch; Goldman Sachs (Asia); Goldman Sachs Lending Partners; ICBC International Finance Limited; and JPMorgan Chase Bank have agreed as underwriters and/or mandated lead arrangers to underwrite and/or arrange (directly or through their affiliates) an aggregate of US$850 million in debt financing for the merger, subject to certain conditions; and (iii) cash in Giant Interactive Group and its subsidiaries.
Giant Interactive Group's board of directors, acting upon the unanimous recommendation of the special committee formed by the board of directors, unanimously approved the merger agreement and the transactions contemplated by the merger agreement, including the merger, and resolved to recommend that the company's shareholders authorize and approve the merger agreement and the transactions contemplated by the merger agreement, including the merger. The merger, which is currently expected to close during the second half of 2014, is subject to customary closing conditions, including the approval by an affirmative vote of holders of shares representing at least two-thirds of the shares present and voting in person or by proxy as a single class at a meeting of the company's shareholders, which will be convened to consider the authorization and approval of the merger agreement and the transactions contemplated by the merger agreement, including the merger, and the other closing conditions specified in the merger agreement. If completed, the merger will result in Giant Interactive Group becoming a privately held company and its ADSs will no longer be listed on the NYSE.
Wilson Sonsini Goodrich & Rosati is acting as the U.S. legal counsel to Mr. Yuzhu Shi and the buyer group in the matter. The WSGR team is led by partners Weiheng Chen and Zhan Chen, and also includes Wei Xiao, Kevin Hui Li, Jing Xu, Michael Hao Zhou, and Yuwen Hua.